The Pennsylvania Lottery has been described as a successful, self-supporting state agency that has brought in piles of money benefiting scores of Pennsylvanians.

View full sizeGov. Tom Corbett's advisory council on innovation and privatization has discussed privatizing PHEAA, but one Capitol observer thinks the governor's hands are full with his push to privatize the state liquor system and management of the Pennsylvania Lottery.File photo/Jenny Kane, The Patriot-News, 2011

The same could be said for the Pennsylvania Higher Education Assistance Agency, a state agency that netted $192.4 million in earnings last year from its student loan collection activities.

However, the idea has crossed the minds of members of his advisory council on privatization and innovation, said one member of that council.

“That has certainly come up,” said Brouillette, president of the Harrisburg-based Commonwealth Foundation, a conservative-leaning policy center.

“I wouldn’t say it’s on the front burner but it has been part of the discussion as we explore what operations are not necessary for government to be owning and operating.”

PHEAA’s board chairman, Rep. Bill Adolph, R-Delaware County, said he would be concerned if PHEAA became the focus of a privatization move.

“It’s a hugely successful state agency, well-run, and I think it’s an asset for the state, … not to mention the $80 million we contributed to the state grant program last year,” said Adolph, who is House Appropriations Committee chairman.

He said PHEAA is a self-supporting operation of 2,900 employees that relies on no taxpayer support. The lottery, though self-supporting, is a division of the state Department of Revenue that does rely on taxpayer dollars to collect the taxes.

As for the liquor system, he said that’s a monopoly run by the state. PHEAA competes on a national scale with other loan servicers for federal student loan business.

Corbett last week declined to share whether he had considered or is considering PHEAA as a candidate for his privatization pursuits.

He said the privatization of the lottery management and state’s wholesale and retail liquor business are what he has put on the table to generate money for senior citizen programs and education, respectively.

“We’ll see what other people have to offer,” he said. “I don’t have a corner on the answer. This is our proposal.”

Senate Appropriations Committee Chairman Jake Corman, R-Centre County, said he thinks it’s fair to look at a PHEAA privatization proposal.

“I don’t think you should take anything just arbitrarily off the table,” said Corman, who is a former PHEAA board member. “ If we can develop a plan that brings a good bit of money for the asset and also enhances grants and loans, then so be it. It’s a good thing.”

In addition to bringing in revenue, Brouillette said there is a cost-savings that could be derived by turning PHEAA over to private hands. Its employees would not continue to accrue taxpayer-supported pensions and retirement health care, he said.

“It’s not an intangible but a real cost,” he said. “We have to look at everything.”

In December 2004, Sallie Mae, a for-profit student loan provider and collector, offered to pay $1 billion to take over PHEAA. The board rejected the offer outright.

It said Sallie Mae’s profit-making motive was inconsistent with the agency’s public service mission. It also objected to Sallie Mae’s outsourcing jobs to foreign countries.

A spokeswoman for Newark, Del.-based Sallie Mae declined to say whether the company still holds an interest in acquiring PHEAA.

“Our policy is not to comment on possible acquisition or disposition activities or rumors,” said company spokeswoman Patricia Christel.

But a lot has changed in the federal student loan world since Sallie Mae made that offer.

Banks are no longer the middle man between student borrowers and the federal government.

Now the federal government is the sole lender and it has hired PHEAA and Sallie Mae among the entities to service those loans. PHEAA’s contract with the federal government expires in June 2014.

Democratic lawmakers say they don’t see any reason for Corbett to look at privatizing PHEAA, just like they oppose his selling off the liquor stores and privatizing the lottery management.

House Democratic Appropriations Committee Chairman Joe Markosek, D-Allegheny, a former PHEAA board member, said, “Trying to sell valuable assets is not the way to get us out of our problems.”

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